Great Southern earnings fell to $14.0 million, or $1.27 per diluted share, in the third quarter of 2026 as a non-cash hedge-accounting adjustment reduced profit. The preliminary results, announced October 21 for the quarter ended September 30, also showed shrinking loan balances as the bank added about $400 million of securities to its balance sheet.
Key Takeaways
- Excluding hedge-accounting adjustments, non-GAAP net income was $16.5 million, or $1.50 per diluted share.
- New securities are generating positive net interest income but are expected to modestly dilute the interest margin.
- Nine banking-center consolidations were completed October 1, with savings expected to begin in the fourth quarter.
Table of Contents
- Great Southern earnings reflect a non-cash accounting charge
- Securities purchases support income, not the margin percentage
- Loan repayments and planned deposit runoff reshape funding
- Fourth-quarter savings follow completed branch consolidations
- Conclusion
Great Southern earnings reflect a non-cash accounting charge
Quarterly net income declined from $17.8 million, or $1.56 per diluted share, a year earlier and $15.8 million, or $1.43 per share, in the second quarter. Even excluding the hedge-accounting effects, earnings remained below the year-earlier reported result.
The company’s preliminary third-quarter earnings announcement explains that historical qualifying variable-rate loan balances were insufficient to support the full designated amount of certain interest-rate swaps. That required some amounts previously recorded in accumulated other comprehensive income to be recognized in earnings.
The initial non-cash reclassification charge was approximately $3.5 million before tax. Including an interest-income benefit recognized during the quarter, the net impact was $3.3 million before tax, or about $2.5 million after tax and $0.23 per diluted share. The adjustment had no effect on total stockholders’ equity or cash balances.
Great Southern redesignated the swaps into new hedging relationships. The company expects the charge to be recovered through interest income over the remaining life of those swaps, with the release identifying an expected earnings benefit through May 2028.
| Item | Details |
|---|---|
| Total assets at September 30 | Approximately $5.82 billion |
| Unfunded construction commitments | $640.8 million |
| Quarterly net charge-offs | $397,000 |
| Book value per common share | $56.97 |
| Quarterly dividend declared | $0.43 per common share |
Securities purchases support income, not the margin percentage
Net interest income was $50.3 million, down $504,000 from a year earlier but up $776,000 from the second quarter. Net interest margin was 3.75%, compared with 3.72% a year earlier and 3.76% in the preceding quarter.
During the quarter, Great Southern purchased approximately $400 million of fixed-rate agency mortgage-backed securities and collateralized mortgage obligations, funded primarily with short-term Federal Home Loan Bank borrowings. The securities carry an expected weighted-average yield of 4.80%–5.00%.
Management said the purchases were intended to mitigate exposure to a significant, sustained decline in market interest rates. The trade currently produces positive net interest income, but its narrower spread is expected to modestly reduce the bank’s overall net interest margin. Dollar income can therefore rise even as the percentage margin falls.
Loan repayments and planned deposit runoff reshape funding
Net loans ended September at $4.25 billion, down $59.3 million from June and $108.4 million, or 2.5%, from December 2025. Commercial real estate and multifamily repayments outweighed growth in construction lending.
Chief Executive Joseph Turner said borrowers sometimes refinance on terms the bank is unwilling to match, including less restrictive guarantees or lower rates. He declined to provide specific loan-growth guidance because payoff activity remains difficult to predict.
Deposits fell $232.1 million during the quarter to approximately $4.07 billion, including $211.8 million of intentional brokered-deposit runoff. Non-interest-bearing checking balances nevertheless increased $29.3 million over the first nine months of 2026.
Nonperforming assets totaled $10.5 million, or 0.18% of assets. The bank recorded no provision on outstanding loans; its $674,000 provision related to unfunded commitments. The rise in other real estate owned primarily reflected closed banking properties held for sale rather than credit-related foreclosures.
Fourth-quarter savings follow completed branch consolidations
Non-interest expense declined to $36.3 million from $38.2 million in the second quarter. Great Southern completed the consolidation of nine banking centers and eliminated 66 positions effective October 1.
Management expects those actions to generate $4.4 million–$4.8 million in annual expense savings and $2.3 million–$2.7 million in annual pre-tax income improvement, beginning in the fourth quarter. Those amounts are projected annual benefits, not savings already realized in the third quarter.
The board also approved a new authorization in October to repurchase up to one million shares, succeeding the existing program. An authorization permits purchases but does not establish that all approved shares will be bought.
Conclusion
The next reporting period will show the initial savings from the completed branch consolidations and a fuller contribution from the securities purchases. For Great Southern earnings, those benefits will sit alongside continuing uncertainty over loan repayments and the expected dilution of the net interest margin.
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